Revenues of $136.6 Million;
GAAP Net Income of $0.24 Per Diluted Share
ENGLEWOOD, Colo., Jan. 25 /PRNewswire-FirstCall/ -- CSG Systems
International, Inc. (Nasdaq: CSGS), a leading provider of customer care and
billing solutions, today reported results for the quarter ended December 31,
2004.
(Logo: http://www.newscom.com/cgi-bin/prnh/20020627/CSGSLOGO)
Fourth Quarter 2004 Highlights:
* GAAP results were as follows: total revenues were $136.6 million;
operating income was $20.7 million; and net income per diluted share
was $0.24. Net income per diluted share was negatively impacted by
approximately $0.02, resulting from foreign currency transaction
losses.
* Cash flows from operations for the quarter ended December 31, 2004
were $22.3 million.
* CSG's Broadband Services Division (BSD) signed a contract with Comcast
immediately after the end of the quarter to provide voice over IP
services to all the customers processed on CSG's solution, which is
approximately two-thirds of Comcast's subscriber base. In addition,
Verizon selected CSG to provide customer care and billing for its
fiber-to-the-home initiative and Time Warner Shreveport will convert
its customers off its legacy billing system and onto CSG's platform.
* CSG's Global Software Services Division (GSS) added another China
Telecom property to its client list with Zhejiang Telecom. In
addition, another e-business company, VinIQ, which is a Canadian
automobile e-commerce site, selected CSG through Telus Business
Solutions to provide customer care and billing services.
* Frost & Sullivan honored CSG with its 2005 Product Leadership award.
* Neal Hansen, chairman and chief executive officer, announced his
intention to retire June 30, 2005. In addition, Hank Bonde joined CSG
as president and chief operating officer.
"As we go into 2005, CSG has never been in a stronger position," said Neal
Hansen, chairman and chief executive officer for CSG Systems International,
Inc. "We have a clearly defined plan for how we will continue to deliver
unmatched value to our customers and continue to grow the business. Now, more
than ever, carriers and operators are turning to companies like CSG to help
them grow their businesses in a profitable way."
Summary Results of Operations Information (unaudited)
(in thousands, except per share amounts):
Three Months Ended Year Ended
December 31, December 31,
2004 2003 2004 2003(2)
Total revenues, net $136,646 $129,857 $529,746 $439,660
Operating income (loss) 20,676 16,358 85,347 (39,561)
Net income (loss) 12,262 7,071 47,184 (26,277)
Net income (loss)
per diluted share 0.24 0.14 0.92 (0.51)
Certain non-cash
expenses(1):
Depreciation 4,403 3,916 15,091 17,378
Amortization 6,982 5,619 27,310 24,303
Stock-based employee
compensation 3,438 1,491 14,886 5,559
Total $14,823 $11,026 $57,287 $47,240
(1) These items are calculated in accordance with GAAP, and are
reflected in the accompanying Condensed Consolidated Statements of
Operations and Cash Flows.
(2) The results of operations for the year ended December 31, 2003
include a $119.6 million charge to revenue related to the Comcast
arbitration ruling, of which $13.9 million was attributed to the
third quarter 2003 revenues, with the remaining $105.7 million
attributed to revenues for periods prior to July 1, 2003.
Fourth Quarter 2004 Results
Processing revenues for the fourth quarter of 2004 were $84.3 million,
which represents a four percent increase compared to $80.8 million for the
same period last year, and to $80.7 million for the third quarter of 2004.
Software revenues increased 12 percent year-over-year to $9.5 million, however
decreased one percent from the third quarter of 2004. Maintenance revenues
remained relatively consistent for the fourth quarter of 2004 at $24.3
million, compared to $24.7 million for the same period last year and
$24.6 million for the third quarter of 2004. Professional services generated
$18.5 million of revenue in the quarter, a 16 percent increase when compared
to the same period last year and a two percent increase when compared to the
third quarter of 2004.
Net income presented under generally accepted accounting principles
("GAAP") for the fourth quarter of 2004 was $12.3 million, or $0.24 per
diluted share, which includes a negative impact of approximately $0.02 per
diluted share, resulting from foreign currency transaction losses. GAAP net
income for the fourth quarter of 2003 was $7.1 million, or $0.14 per diluted
share. The fourth quarter 2003 results were reduced by approximately
$4.2 million, or $0.04 per diluted share, due to restructuring charges.
Divisional Results
CSG is organized into two divisions: the Broadband Services Division and
the Global Software Services Division. CSG excludes its restructuring charges
in the determination of its GAAP segment results. The results of operations
for the two divisions were as follows (in thousands, except percentages):
Three Months Ended December 31, 2004
Broadband
Services GSS
Division Division Corporate Total
Processing revenues $83,662 $657 $-- $84,319
Software revenues 1,095 8,430 -- 9,525
Maintenance revenues 4,710 19,597 -- 24,307
Professional services
revenues 432 18,063 -- 18,495
Total revenues 89,899 46,747 -- 136,646
Segment operating
expenses(3) 55,408 44,911 15,344 115,663
Contribution margin
(loss)(3) $34,491 $1,836 $(15,344) $20,983
Contribution margin
percentage 38.4% 3.9% N/A 15.4%
Three Months Ended December 31, 2003
Broadband
Services GSS
Division Division Corporate Total
Processing revenues $79,323 $1,476 $-- $80,799
Software revenues 1,109 7,410 -- 8,519
Maintenance revenues 3,998 20,659 -- 24,657
Professional services
revenues 658 15,224 -- 15,882
Total revenues 85,088 44,769 -- 129,857
Segment operating
expenses(3) 51,541 44,101 13,610 109,252
Contribution margin
(loss)(3) $33,547 $668 $(13,610) $20,605
Contribution margin
percentage 39.4% 1.5% N/A 15.9%
Year Ended December 31, 2004
Broadband
Services GSS
Division Division Corporate Total
Processing revenues $324,397 $2,697 $-- $327,094
Software revenues 4,094 30,821 -- 34,915
Maintenance revenues 18,912 78,735 -- 97,647
Professional services
revenues 1,040 69,050 -- 70,090
Total revenues 348,443 181,303 -- 529,746
Segment operating
expenses(3) 206,871 173,739 61,095 441,705
Contribution margin
(loss)(3) $141,572 $7,564 $(61,095) $88,041
Contribution margin
percentage 40.6% 4.2% N/A 16.6%
Year Ended December 31, 2003
Broadband
Services GSS
Division(2) Division Corporate Total
Processing revenues
(Broadband Division
net of $13,472 for
the arbitration
charge) $338,936 $3,449 $-- $342,385
Software revenues 5,141 36,290 -- 41,431
Maintenance revenues
(Broadband Division
net of $450 for
the arbitration
charge) 18,755 74,809 -- 93,564
Professional services
revenues 1,550 66,409 -- 67,959
Subtotal 364,382 180,957 -- 545,339
Charge for arbitration
ruling attributable
to periods prior to
July 1, 2003 (105,679) -- -- (105,679)
Total revenues, net 258,703 180,957 -- 439,660
Segment operating
expenses(3) 211,103 190,166 66,102 467,371
Contribution margin
(loss)(3) $47,600 $(9,209) $(66,102) $(27,711)
Contribution margin
(loss) percentage 18.4% (5.1)% N/A (6.3)%
(3) CSG's segment operating expenses and contribution margin (loss),
determined in accordance with GAAP, exclude restructuring charges of
$0.3 million and $4.2 million, respectively, for the three months
ended December 31, 2004 and 2003, and $2.7 million and $11.9
million, respectively, for the year ended December 31, 2004 and
2003.
Broadband Services Division
Total domestic customer accounts processed on CSG's system as of December
31, 2004 were 43.5 million compared to 44.0 million as of September 30, 2004.
Customer accounts decreased quarter over quarter as a result of the
deconversion of a dial-up internet service provider's customer base. The
annualized revenue per processing unit for the fourth quarter of 2004 was
$7.67 compared to annualized revenue per processing unit of $7.36 for the
third quarter of 2004.
Immediately after quarter-end, CSG's Broadband Services Division (BSD)
signed a contract with Comcast to provide voice over IP services to all the
customers processed on CSG's solution, which is approximately two-thirds of
Comcast's customer base. In addition, Verizon selected CSG to provide
customer care and billing services for its fiber-to-the-home initiative, and
Time Warner Shreveport and another Cebridge location will convert their
customers off its legacy billing systems and onto CSG's platform.
CSG's Broadband Services Division enters 2005 with no customer contracts
up for renewal.
Global Software Services Division
The GSS Division signed its fourth contract with a China Telecom property,
Zhejiang Telecom. Zhejiang Telecom will consolidate its four legacy billing
systems onto the Kenan FX platform. When deployed, CSG's customer care and
billing software products will support up to 13 million subscribers in 11
cities across all Zhejiang's services including wireline, IP and broadband.
In addition, CSG had several successful Kenan FX implementations this
quarter, including CTBC, a regional Brazilian convergent operator; MobileOne,
Singapore's leading mobile provider; and Celcom, a Malaysian wireless
provider. And, another e-business company, VinIQ, which is a Canadian
automobile e-commerce site, selected CSG through Telus Business Solutions to
provide customer care and billing services.
Finally, CSG was recently honored with a Product Leadership Award by Frost
& Sullivan. Frost & Sullivan cited CSG as the market leader in software
licenses for the global billing software market.
Financial Condition
As of December 31, 2004, CSG had cash and short-term investments of
$157.5 million, compared to $138.9 million as of September 30, 2004 and
$105.4 million as of December 31, 2003. Billed net accounts receivable were
$142.1 million as of December 31, 2004, compared to $123.3 million as of
September 30, 2004 and $130.7 million as of December 31, 2003.
Cash flows from operations for the quarter ended December 31, 2004 were
$22.3 million. This compares to $24.8 million for the third quarter of 2004
and $(38.5) million for the fourth quarter of 2003. The fourth quarter of
2003 reflects the impact of a $94.4 million arbitration payment made to
Comcast.
During the fourth quarter of 2004, CSG did not acquire any of its common
stock under its Board-approved stock repurchase plan. The company plans to
enter into a corporate 10(b)5-1 plan in the first quarter of 2005, for the
purposes of repurchasing the company's stock.
Irrevocable Election to Settle Convertible Debt Securities
During the fourth quarter of 2004, CSG adopted EITF 04-8, "The Effect of
Contingently Convertible Instruments on Diluted Earnings per Share." The
EITF's consensus decision states that shares to be potentially issued under
contingently convertible instruments should be included in diluted earnings
per share (if dilutive) regardless of whether any of the contingent conversion
features have been met.
On December 15, 2004, CSG made an irrevocable election to settle the
$230 million principal portion of its Convertible Debt Securities in cash upon
conversion. As a result of this election, CSG will calculate dilution for its
Convertible Debt Securities using the "treasury stock" method. Under the
treasury stock method, CSG has no reduction in its previously reported
earnings per diluted share in the second and third quarters of 2004 (due to
the adoption of EITF 04-8), and experienced no dilution for the Convertible
Debt Securities for the fourth quarter of 2004, as CSG's average stock price
did not exceed the current effective conversion price of $26.77 per share
during these periods. In addition, going forward, the Convertible Debt
Securities will impact CSG's diluted earnings per share calculation only in
those periods in which CSG's average stock price exceeds the current effective
conversion price of $26.77 per share.
First Quarter 2005 Financial Guidance
"For the first quarter of 2005, we are expecting revenues of between
$130 million and $137 million and GAAP earnings per diluted share of between 8
and 14 cents," Peter Kalan, chief financial officer, said. "Our first quarter
earnings per share guidance is negatively impacted by 5 cents associated with
the accrual of retirement benefits for Mr. Hansen.
"In addition, there are over $15 million of non-cash items included in our
first quarter earnings per share guidance, or approximately 19 cents per
diluted share," Kalan said. "These non-cash items include amortization of
approximately $7 million, depreciation expense of approximately $4 million,
and stock-based employee compensation expense of approximately $4 million.
Our guidance does not include any restructuring charges that may be incurred
during the quarter as we are not able to estimate them today."
Conference Call
CSG will host a one-hour conference call on Tuesday, January 25, at
5 p.m. EST, to discuss CSG's fourth quarter results. The call will be carried
live and archived on the Internet. A link to the conference call is available
at http://www.csgsystems.com.
Additional Information
For additional information about CSG, please visit CSG's web site at
http://www.csgsystems.com. Additional information can be found in the Investor
Relations section of the web site.
About CSG Systems International
Headquartered in Englewood, Colorado, CSG Systems International
(Nasdaq: CSGS) is a leader in next-generation billing and customer care
solutions for the cable television, direct broadcast satellite, advanced IP
services, next generation mobile, and fixed wireline markets. CSG's unique
combination of proven and future-ready solutions, delivered in both outsourced
and licensed formats, empowers its clients to deliver unparalleled customer
service, improve operational efficiencies and rapidly bring new
revenue-generating products to market. CSG is an S&P Midcap 400 company. For
more information, visit CSG's Web site at http://www.csgsystems.com.
This news release contains forward-looking statements as defined under the
Securities Act of 1933, as amended, that are based on assumptions about a
number of important factors and involve risks and uncertainties that could
cause actual results to differ materially from what appears in this news
release. These factors include, but are not limited to: 1) CSG's ability to
continue to perform satisfactorily and maintain good customer relations with
its two largest customers, Comcast and Echostar Communications, which combined
represent approximately one-third of CSG's revenue; 2) the continued
acceptance of CSG CCS/BP, CSG Kenan FX and their related products and
services; 3) CSG's ability to enhance current products and develop new
technology that will retain existing clients and capture new market share; 4)
significant forays into new markets, which may prove costly and unprofitable;
5) the degree to which CSG's expectations of market penetration and consumer
acceptance of broadband, wireline and wireless services prove true -- and even
if realized, CSG's ability to meet the billing and customer care needs of
those markets; 6) client consolidation, which has decreased the number of
potential buyers for many of CSG's products and services; 7) CSG's ability to
expand and effectively operate its business internationally, which is much
more complex and carries a higher collections and currency risk; 8) CSG's
ability to renew software maintenance contracts and sell additional software
products and services to existing and new clients, both domestically and
internationally; and 9) CSG's ability to successfully deliver on lengthy
and/or complex implementation projects, which by their nature, carry much more
risk. This list is not exhaustive and readers are encouraged to review the
additional risks and important factors described in CSG's reports on Forms
10-K and 10-Q and other filings made with the SEC.
CSG SYSTEMS INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS -- UNAUDITED
(in thousands, except share and per share amounts)
December 31, December 31,
2004 2003
ASSETS
Current assets:
Cash and cash equivalents $140,751 $105,397
Short-term investments 16,727 --
Total cash, cash equivalents and
short-term investments 157,478 105,397
Trade accounts receivable --
Billed, net of allowance of $4,818
and $11,145 142,056 130,691
Unbilled and other 14,030 18,042
Deferred income taxes 5,336 9,134
Income taxes receivable 4,064 35,076
Other current assets 11,723 11,697
Total current assets 334,687 310,037
Property and equipment, net of depreciation
of $87,068 and $89,529 34,476 38,218
Software, net of amortization of $77,086 and
$62,957 24,695 37,780
Goodwill 218,346 219,199
Client contracts, net of amortization of
$62,898 and $50,973 50,197 58,136
Deferred income taxes 39,478 53,327
Other assets 8,528 8,078
Total assets $710,407 $724,775
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $-- $45,137
Client deposits 19,497 17,175
Trade accounts payable 22,412 21,291
Accrued employee compensation 31,859 32,415
Deferred revenue 53,250 52,655
Income taxes payable 15,085 20,723
Arbitration charge payable -- 25,181
Other current liabilities 19,909 25,818
Total current liabilities 162,012 240,395
Non-current liabilities:
Long-term debt, net of current maturities 230,000 183,788
Deferred revenue 6,844 3,270
Other non-current liabilities 3,481 6,537
Total non-current liabilities 240,325 193,595
Total liabilities 402,337 433,990
Stockholders' equity:
Preferred stock, par value $.01 per share;
10,000,000 shares authorized;
zero shares issued and outstanding -- --
Common stock, par value $.01 per share;
100,000,000 shares authorized;
51,016,326 shares and 53,788,062 shares
outstanding 595 593
Additional paid-in capital 298,767 281,784
Deferred employee compensation (1,320) (4,458)
Accumulated other comprehensive income (loss):
Unrealized gain (loss) on short-term
investments, net of tax (5) 1
Cumulative translation adjustments 9,400 6,519
Treasury stock, at cost, 8,482,496 shares
and 5,499,796 shares (224,008) (171,111)
Accumulated earnings 224,641 177,457
Total stockholders' equity 308,070 290,785
Total liabilities and
stockholders' equity $710,407 $724,775
CSG SYSTEMS INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS -- UNAUDITED
(in thousands, except per share amounts)
Three Months Ended Year Ended
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
2004 2003 2004 2003
Revenues:
Processing and related
services (inclusive in
2003 of $13,472 charge
for arbitration ruling
attributable to the
third quarter of 2003) $84,319 $80,799 $327,094 $342,385
Software 9,525 8,519 34,915 41,431
Maintenance (inclusive
in 2003 of $450 charge
for arbitration ruling
attributable to the
third quarter of 2003) 24,307 24,657 97,647 93,564
Professional services 18,495 15,882 70,090 67,959
136,646 129,857 529,746 545,339
Charge for arbitration
ruling attributable to
periods prior to
July 1, 2003 -- -- -- (105,679)
Total revenues, net 136,646 129,857 529,746 439,660
Cost of revenues:
Cost of processing and
related services 41,387 35,043 147,789 141,242
Cost of software and
maintenance 15,663 18,452 66,394 72,703
Cost of professional
services 16,050 13,904 62,993 63,910
Total cost of revenues 73,100 67,399 277,176 277,855
Gross margin (exclusive of
depreciation) 63,546 62,458 252,570 161,805
Operating expenses:
Research and development 13,765 16,181 59,022 62,924
Selling, general and
administrative 24,395 21,756 90,416 109,214
Depreciation 4,403 3,916 15,091 17,378
Restructuring charges 307 4,247 2,694 11,850
Total operating
expenses 42,870 46,100 167,223 201,366
Operating income (loss) 20,676 16,358 85,347 (39,561)
Other income (expense):
Interest expense (2,285) (4,070) (10,334) (14,717)
Write-off of deferred
financing costs -- -- (6,569) --
Interest and investment
income, net 758 325 1,850 1,437
Other, net (1,299) 799 (1,088) 4,381
Total other (2,826) (2,946) (16,141) (8,899)
Income (loss) before
income taxes 17,850 13,412 69,206 (48,460)
Income tax (provision)
benefit (5,588) (6,341) (22,022) 22,183
Net income (loss) $12,262 $7,071 $47,184 $(26,277)
Basic net income (loss)
per common share:
Net income (loss)
available to common
stockholders $0.25 $0.14 $0.93 $(0.51)
Weighted average
common shares 49,375 51,610 50,477 51,432
Diluted net income (loss)
per common share:
Net income (loss)
available to common
stockholders $0.24 $0.14 $0.92 $(0.51)
Weighted average
common shares 50,216 51,836 51,223 51,432
CSG SYSTEMS INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS -- UNAUDITED
(in thousands)
Year Ended
December 31, December 31,
2004 2003
Cash flows from operating activities:
Net income (loss) $47,184 $(26,277)
Adjustments to reconcile net income (loss)
to net cash provided by
operating activities --
Depreciation 15,091 17,378
Amortization 27,310 24,303
Restructuring charge for abandonment
of facilities 909 4,424
Gain on short-term investments (49) (19)
Write-off of deferred financing costs 6,569 --
Deferred income taxes 17,887 2,018
Tax benefit of stock-based
compensation awards 1,312 33
Stock-based employee compensation 14,886 5,559
Changes in operating assets and liabilities:
Trade accounts and other receivables, net (4,003) 45,604
Other current and non-current assets (338) (1,536)
Arbitration charge payable (25,181) 25,181
Income taxes payable/receivable 26,231 (41,244)
Accounts payable and accrued liabilities (10,075) (2,003)
Deferred revenues 1,535 6,932
Net cash provided by
operating activities 119,268 60,353
Cash flows from investing activities:
Purchases of property and equipment (9,655) (9,021)
Purchases of short-term investments (25,494) (7,763)
Proceeds from sale of short-term investments 8,810 8,795
Acquisition of businesses and assets,
net of cash acquired (834) (2,613)
Acquisition of and investments in
client contracts (3,466) (1,767)
Net cash used in investing activities (30,639) (12,369)
Cash flows from financing activities:
Proceeds from issuance of common stock 6,926 1,670
Repurchase of common stock (55,898) (207)
Proceeds from long-term debt 230,000 --
Payments on long-term debt (228,925) (41,075)
Payments of deferred financing costs (8,213) (1,077)
Net cash used in financing activities (56,110) (40,689)
Effect of exchange rate fluctuations on cash 2,835 3,678
Net increase in cash and cash equivalents 35,354 10,973
Cash and cash equivalents, beginning of period 105,397 94,424
Cash and cash equivalents, end of period $140,751 $105,397
Supplemental disclosures of cash flow
information:
Cash paid (received) during the period for --
Interest $8,237 $11,251
Income taxes (23,009) 13,035
SOURCE CSG Systems International, Inc.
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Related links:
http://www.csgsystems.com
Photo Notes:
NewsCom:
http://www.newscom.com/cgi-bin/prnh/20020627/CSGSLOGO
AP Archive: http://photoarchive.ap.org
PRN Photo Desk, photodesk@prnewswire.com
CONTACT:
Liz Bauer, Senior Vice President of CSG
Systems International, Inc., +1-303-804-4065,
liz_bauer@csgsystems.com
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